In Las Vegas, Kickbacks Sweeten the Deal for Uber and Lyft Drivers

For decades, Vegas night clubs have paid taxi drivers to bring in new customers. Now ride-sharing drivers find that a good hustle can pay off.

Harry Campbell and his friends were walking down a side street in Las Vegas last spring when a black Escalade pulled up beside them. The driver made an offer: He’d take them to a strip club and give each person—all ten of them—a $20 bill if they got in the SUV.

It sounds odd, but it made perfect sense, says Campbell, founder of The Rideshare Guy blog and podcast. The driver wanted to entice the group to go to the strip club because the club would pay him a kickback for each person he brought there. For any takers, that upfront cash could make a dent in the club’s cover charge. The driver, meanwhile, stood to make anywhere from $40 to $80 per person just for dropping them off.

Kickbacks are an old fixture of the Vegas taxi industry. They’re essentially a finder’s fee paid to drivers by any assortment of businesses, but especially ones dealing in vice, like strip clubs, gun ranges, liquor stores, and, more recently, cannabis dispensaries. It’s a practice that has persisted in Las Vegas for decades as a way for businesses to keep a leg up on the competition. And while these incentives have long been a way for taxi drivers to boost their earnings, they’ve also become an important source of income for many Uber and Lyft drivers—especially as those companies have cut rates since arriving in the city in 2015. Knowing how to play the game can really change a driver’s fortunes.

“My biggest objective is kickbacks,” says Derrick Smith, a Las Vegas ride-share driver and coach. “I’m spoiled now, but I can make anywhere between $50 to $700 [per week] in kickbacks. I would not still be doing this if it weren’t for kickbacks.”

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For decades, the kickbacks ecosystem developed in something of a legal gray area. After arising in the 1950s, the practice was eventually challenged in court in the 1980s, when the Phillips Supper Club was sued by other local restaurants for its practice of tipping $3 per head to every taxi driver who dropped off customers, says Albert Marquis, a lawyer who has argued in court against kickbacks. The parties in that case settled, Marquis says, so the legal question of whether a business can take action against kickbacking competitors remained unsettled.

Then, in 2011, a federal judge dismissed a class-action suit that alleged racketeering between Vegas strip clubs and taxi drivers, effectively letting kickbacks stand unperturbed. The case stemmed from a 2009 suit in which a southern California man sued several Vegas taxi companies and strip clubs after he’d asked to be taken to one club but was instead taken to another. The judge in the case swatted down the racketeering claim, saying he couldn’t find anything illegal about kickbacks. Clubs could charge what they wanted, and pay whomever they wanted, as long as they deliver the product, the judge wrote. To underscore kickbacks’ current status, all drivers who receive them are legally required to file 1099 tax forms from each business that has paid them.

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Still, there’s one key thing drivers can’t do: Divert passengers from their stated destination. Nevada law prohibits drivers from directly re-routing passengers to businesses that are paying out. That concern might be more easily avoided in ride-sharing services, where customers state their destinations before even getting matched with a driver. Still, the law doesn’t keep drivers from recommending a stop at kickback-paying locations along the way.

Jeff, a Vegas native and ride-share driver who asked not to use his full name for fear of negative consequences from ride-sharing companies, says he presents a kickback-paying opportunity as a simple suggestion before customers reach their destination.

“I’ll say, do you guys want to go to the dispensary [and] they’ll say yeah,” he says. “Then they’ll go in, and I’m on the clock, waiting, and then I go up and tell [the business] I’m a driver and I brought in a group. Then whatever the deal is we’ll go through the process, they’ll give me a W-9, [I] show them an ID, and they pay you out after. It doesn’t take very long. You try to get it done before the customer comes back out.”

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With kickbacks’ legality on more stable ground, some see an opportunity to help ride-sharing drivers bolster their earnings from a gig that can be unpredictable and at the mercy of inscrutable algorithms and companies.

Several drivers who spoke with me for this story lamented that rates have fallen (the cost per mile dropped from $1.85 to $0.90) and worry that an oversaturation of drivers is cutting into their profitability. According to a study conducted by Campbell and The Rideshare Guy blog, the average hourly rate for a ride-share driver in Vegas, when adjusted for cost of living, is only $15.26, which is almost $3 less than what it takes to rent an average two-bedroom unit in Nevada.

A Philadelphia native, Ryan Antilla has driven taxis in Key West and Las Vegas, driven ride-share in Vegas, and run a magazine called Vegas Driver Magazine, which shared intel about kickbacks from local businesses. Today, he’s the founder of the Vegas Kickbacks app, which helps drivers track what businesses are offering drivers. When he moved to Vegas a decade ago, he encountered an industry that was already going downhill.

“I remember going to the application office and an old-timer guy was speaking to his friend about how bad last night was,” he says. In the heart of the recession, the city’s taxis took a beating: Nevada Taxicab Authority statistics show a 15.45 percent decline in monthly rides between 2008 and 2009, and a 6.15 percent drop between 2007 and 2008. But, Antilla says, taxi drivers saw kickbacks from strip clubs as a lifeline. He estimates that cabbies and limo drivers at this time could make anywhere from $500 to $1,000 per night off kickbacks alone. All they had to do was sit in line outside a hotel and wait.

“If I don’t treat [the drivers] right, it really does make an impact. We really do rely on them.”

But when Uber and Lyft arrived in 2015, they nearly gave businesses a break from kickbacks. Ride-share began eating into taxis’ rides and revenue (both have dropped in every month since 2015), and business operators expected that the amount they paid for kickbacks would drop with an influx of new drivers who didn’t know about the practice. Even those who did could be given less, since, in theory, they couldn’t divert riders.

“For some reason, the really high-end places that turn a lot business pay [taxis and limos] $80 per head,” Jeff says. “A ride-share guy brings in someone and now it’s $20 per head. They just fuck you. … They think it’s not worth it.”

Still, Brian Minter, operator of Sophia’s Gentlemen’s Club, felt the kickback reprieve was coming. Minter says his club currently pays out about 55 percent of its revenue to kickbacks, leaving Sophia’s with a razor-thin margin. That cost of kickbacks is passed on to the customer through higher drink prices and other fees. Minter says the early days of ride-sharing made it feel like their dependence on kickbacks was coming to an end, but an unexpected force turned things around: taxi drivers.

“Because Uber and Lyft have taken a big share out of the taxi industry, cab drivers have gone into becoming Uber and Lyft drivers,” Minter says. In the early days of ride-sharing, a lot of those new, nonprofessional drivers didn’t even know they could get their $20 kickback from the club. “Now that these drivers by trade are doing ride-share, they’re deferring [riders] to wherever is paying the most.”

The largest strip clubs were paying $50 per drop-off to ride-share drivers, and as more taxi drivers became ride-share drivers, other clubs felt pressure to boost their rates to ride-share drivers. Smith, the ride-share driver and coach, says taxi drivers are increasingly seen as allies when it comes to kickbacks.

“Cab drivers were only our enemy for the first three months,” Smith says. “And then they just woke up and just jumped into a car with us. Pretty much, we’re in the same brotherhood.”

Increasingly, that’s having an effect on businesses outside the strip club industry, too. Ron Reavis, director of operations at the Pisos marijuana dispensary, says both ride-share and cab drivers have been the ones helping him and his staff fine-tune their kickbacks program to ensure it runs as seamlessly as possible.

Some Las Vegas cannabis dispensaries rely on kickbacks to Uber and Lyft drivers to get customers in the door. (John Locher/AP)

Pisos pays $15 per drop-off to every ride-share and taxi driver, no matter how many people are in the car, even if the customers don’t buy anything. That setup helped build trust among drivers, Reavis says. He also received feedback from seasoned taxi drivers about how to best mask the process of paying the kickback, which involves in-the-know drivers walking their passengers into the store to ensure they’re properly taken care of—the “I know a guy” routine—before collecting a payout at the front desk. In a city like Las Vegas, it’s an inverted but incredibly important form of customer service.

“I have to remind my staff all of the time, while the consumer’s experience is important, that consumer I’ll see once or twice during their trip and then they’re gone,” Reavis says. “If I don’t treat [the drivers] right, it really does make an impact. We really do rely on them.”

As Antilla sees it, driving people around Vegas is often thankless work, and locals should be able to capitalize off their knowledge. He built his app because he saw how cutthroat cabbies could be and wanted to ensure that ride-share drivers got their cut, too, for recommending what the city has to offer.

If his app is to evolve beyond being a directory for kickbacks, he hopes it becomes a service where a driver can recommend any business in any industry, give a customer a code that includes a deal, and get a kickback automatically when the customer uses it. Whether or not it goes that way remains to be seen, but Antilla is optimistic about the prospect.

“You’re going to be that person that people ask, What should I do in Vegas? What should I do? Everything is going to this driver and he’s going to answer it 20 times per night. So if he’s going to plant those seeds, shouldn’t he at least get $5, $1—I don’t care what it is—if he’s giving these recommendations and these people actually convert?” he says. “You’re not just a driver. You become an ambassador.”